PENSION FUNDS, FACING DEFICITS, BORROW TO INVEST

U.S. pension funds are falling far short of the money they need to meet the payments they will owe to America’s retirees, The Wall Street Journal reported.

To make up the difference, the funds are investing with money they have borrowed.

Pension funds issued almost $13 billion in bonded debt in 2021, more than in the five previous years combined.

The Teacher Retirement System of Texas began borrowing in 2019. It is the fifth largest pension fund in the U.S. This month, CALPERS—the California Public Employees Retirement System—with $440 billion in assets will begin borrowing for the first time ever.

If pension funds are unable to meet their obligations, their payments are continued through the Pension Benefit Guaranty Corp. (PBGC), a federal agency that insures pension funds. 

After receiving a dose of money from president Joe Biden’s 2021 American Rescue Plan, the PBGC says it has enough money to fund its current obligations through at least 2052.

TREND FORECAST: Pension funds borrowing to invest. What could go wrong? What a joke! It’s a gamblers game. A significant number of pension funds already are projecting red ink. 

Given the state of financial markets and a Baby Boom generation knocking on pension funds’ doors, more funds will resort to the PBGC—which, in turn, will resort to asking Congress to channel more money to it.